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Feedback in Tournaments under Commitment Problems: Theory and Experimental Evidence

Author

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  • Gürtler, Oliver

    (University of Bonn)

  • Harbring, Christine

    (RWTH Aachen University)

Abstract

In this paper, we analyze a principal's optimal feedback policy in tournaments. We close a gap in the literature by assuming the principal to be unable to commit to a certain policy at the beginning of the tournament. Our analysis shows that in equilibrium the principal reveals intermediate information regarding the agents’ previous performances if these performances are not too different. Moreover, we investigate a situation where the principal is not able to credibly communicate her information. Having presented our formal analysis, we test these results using data from laboratory experiments. The experimental findings provide some support for the model.

Suggested Citation

  • Gürtler, Oliver & Harbring, Christine, 2007. "Feedback in Tournaments under Commitment Problems: Theory and Experimental Evidence," IZA Discussion Papers 3111, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3111
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    References listed on IDEAS

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    1. Lazear, Edward P & Rosen, Sherwin, 1981. "Rank-Order Tournaments as Optimum Labor Contracts," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 841-864, October.
    2. Alannah Orrison & Andrew Schotter & Keith Weigelt, 2004. "Multiperson Tournaments: An Experimental Examination," Management Science, INFORMS, vol. 50(2), pages 268-279, February.
    3. Weigelt, Keith & Dukerich, Janet & Schotter, Andrew, 1989. "Reactions to discrimination in an incentive pay compensation scheme: A game-theoretic approach," Organizational Behavior and Human Decision Processes, Elsevier, vol. 44(1), pages 26-44, August.
    4. Christian Grund & Dirk Sliwka, 2005. "Envy and Compassion in Tournaments," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 187-207, March.
    5. Harbring, Christine & Irlenbusch, Bernd, 2004. "Incentives in Tournaments with Endogenous Prize Selection," IZA Discussion Papers 1340, Institute of Labor Economics (IZA).
    6. Christine Harbring & Bernd Irlenbusch, 2005. "Incentives in Tournaments with Endogenous Prize Selection," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(4), pages 636-663, December.
    7. Paul R. Milgrom, 1981. "Good News and Bad News: Representation Theorems and Applications," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 380-391, Autumn.
    8. Rosen, Sherwin, 1986. "Prizes and Incentives in Elimination Tournaments," American Economic Review, American Economic Association, vol. 76(4), pages 701-715, September.
    9. Hans K. Hvide, 2002. "Tournament Rewards and Risk Taking," Journal of Labor Economics, University of Chicago Press, vol. 20(4), pages 877-898, October.
    10. Aoyagi, Masaki, 2010. "Information feedback in a dynamic tournament," Games and Economic Behavior, Elsevier, vol. 70(2), pages 242-260, November.
    11. O'Keeffe, Mary & Viscusi, W Kip & Zeckhauser, Richard J, 1984. "Economic Contests: Comparative Reward Schemes," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 27-56, January.
    12. Grossman, S J & Hart, O D, 1980. "Disclosure Laws and Takeover Bids," Journal of Finance, American Finance Association, vol. 35(2), pages 323-334, May.
    13. Christine Harbring & Bernd Irlenbusch & Matthias Krakel & Reinhard Selten, 2007. "Sabotage in Corporate Contests - An Experimental Analysis," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 14(3), pages 367-392.
    14. Lazear, Edward P, 1989. "Pay Equality and Industrial Politics," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 561-580, June.
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    Cited by:

    1. Eriksson, Tor & Poulsen, Anders & Villeval, Marie Claire, 2009. "Feedback and incentives: Experimental evidence," Labour Economics, Elsevier, vol. 16(6), pages 679-688, December.
    2. Bernd Frick & Oliver Gürtler & Joachim Prinz, 2008. "Anreize in Turnieren mit heterogenen Teilnehmern — Eine empirische Untersuchung mit Daten aus der Fußball-Bundesliga," Schmalenbach Journal of Business Research, Springer, vol. 60(4), pages 385-405, June.

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    More about this item

    Keywords

    feedback; commitment problems; tournament; experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects

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